The Mid-Life Finance MOT – Giving Your Wealth A Check-Over

A Finance MOT

You don’t think twice about taking your car for a regular check up once a year to make sure it’s running soundly, so why not do the same with your finances? No matter how solid your financial plan may appear to be, keeping it updated to reflect changes in your life is vital to your financial aspirations.

A Finance MOT is useful in several ways: helping to manage your existing assets, creating future capital and protecting against any potential financial risks.

A mid-life finance MOT should take place when the investor is beginning to seriously think about retiring, however it should not be so late that it would be impossible to get back on track. Checking finances at the age of around 45 would help people become more prepared for retirement, and should the check-up reveal financial issues which require further exploration, there is still sufficient time to address the matter.

Rebalancing Your Portfolio

A good starting point could be to look at what is already in place and how those investments or plans are performing. During a year, lots can happen which could have an impact on your investments. Some may be underperforming, while some may be making more than imagined, and taking the profits could be beneficial.

At City Man we have always been very keen on regular portfolio checks to make sure that you are always getting the best from your hard work. We work with partners who will look at your circumstances and existing plans and give advice on how to make things work better for you. Furthermore the initial consultation is at no cost!

Coping With Being Part Of A Sandwich Generation

The term “sandwich generation” has been coined to refer to those approaching middle age and who have to deal with the financial burden of childcare costs, university fees and the essentials like a car or house deposit as well as being responsible for caring for ageing parents who may suffer from ill health.

There are, however, strategies which can be put in place to survive this life stage, and good preparation is one. However, if the cost of care for elderly relatives comes as a surprise, how do you know what needs prioritising? And how is it possible to maintain your own money on an even keel?

Checking Insurance Policies

If you have had financial advice in the past, you may already have insurance policies like critical illness cover, life assurance and income protection insurance.

Instead of routinely renewing these policies annually, you should take the time to check the income which you’re insuring remains appropriate. Maybe your salary has increased, or maybe you’ve paid off your mortgage? Decreasing or increasing your cover may be necessary and checking every year could save you money.

Vitally, if you still have no income protection or life insurance, you need to seriously consider taking some out. If you work and have a mortgage and dependents, you need to consider how they would manage if you suddenly lost your job, became too ill to work, or if the worst should happen. If you have no suitable financial protection, you should ensure you put some in place to close this gap in your financial plan.

Have Your Savings For Retirement Stayed On Track?

All too often we end up looking back on our lives and wishing we’d done things in a different way. A study carried out recently showed that two out of every five pensioners regretted making mistakes in planning for their retirement that have resulted in financial difficulties later in life. Almost a fifth of pensioners thought they hadn’t managed to save a sufficient amount to make them comfortable during their retirement, while another 15% wished that they had begun saving earlier when they were still working.

Pension Stats UK

A commonly seen challenge is being able to build a large enough fund for retirement. One possibility is to pay in extra to your pension to top it up as far as possible every year, or even switch funds altogether. For other people, however, it might mean that it is necessary to take action in order to ensure that their pension fund will not exceed their lifetime allowance, since breaching that amount will lead to taxation as high as 55%. Taking preventative measures to avoid this whenever possible is always advised. Frequently, savers are obliged to increase the amount they contribute in order to maximise their tax efficiency, while hitting their targets for retirement. At present, the amount set for annual allowance is £40,000 pa, and this represents the largest amount which you are able to contribute into a pension while still potentially receiving tax relief at the marginal rate.

Boosting Savings And Pensions Through Tax-Efficient Investments

UK tax treatment of savings and investments is constantly changing and has become quite complex, especially with recent developments around pension freedoms. It’s crucial that individuals and families seek support on an ongoing basis to ensure that their savings are invested in the appropriate strategies and in the right tax wrappers, and that they take advantage of the myriad of tax reliefs currently on offer from HMRC. The appropriate approach for one individual may be completely different from another, so there is never a “one size fits all” solution.

Simon Beazley – AAG Wealth Management

The government have targeted a large array of tax allowances at families, investors and savers, yet a surprising number have not been actively claimed since they require the individual to be assertive. Many people, for example, have not used their entire ISA allowance, worth £20,000 in this tax year. Many people have not opened Junior ISAs for their children, even though they could be worth a maximum of £4,260 for each child. Many more people are not using their capital gains tax allowance. While this is complicated and requires the selling of a holding in order to realise gains and therefore taking professional advice is wise, it is still important not to let such a valuable allowance be wasted since it can exempt you this year from the initial capital gains of £11,700. Ensuring loved ones have a good start in life is also possible by gifting them money every year. As an added effect, this can reduce your estate for the purposes of calculating your inheritance tax. With this in mind, making use of your entire gifting allowance is an important element of anyone’s annual calendar of finances.

We believe everyone should be aware of their financial circumstances and be able to make decisions that are well informed. For this reason, asking a professional financial adviser to carry out a finances MOT or check-up is vital, our partners don’t charge anything for this check.

It is not only an opportunity to check the financial arrangements you have already put in place, but like your car MOT, it is also a chance to think about any new parts that you wish to install.